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Our Health Care Future: Medicaid

On July 30, the Bipartisan Policy Center (BPC) hosted a group of experts to address the impact of the U.S. Supreme Court ruling on the Patient Protection and Affordable Care Act (PPACA). The keynote speakers and roundtable discussions focused on the future of the Medicaid program, insurance market reforms and the political consequences of the decision. A first in a series, this blog post summarizes the forum’s Medicaid discussion.


The most surprising outcome of the June 28, 2012 SCOTUS ruling was that states are no longer required to expand Medicaid coverage to individuals earning up to 133 percent of the federal poverty level (FPL). Of the 32 million who stood to gain coverage under PPACA, nearly 17 million – half – were supposed to be covered by Medicaid. Now that the expansion is optional rather than mandatory, it is unclear how many people will be covered by Medicaid.

In fact, it seems reasonable to assume that several million individuals will not only be ineligible for Medicaid but will also be unable to afford commercial insurance. PPACA was structured under the assumption that Medicaid would cover the poorest uninsured population, so federal subsidies to purchase insurance through the newly created insurance exchanges are not available to those below 100 percent of FPL. Individuals between 100 to 133 percent of FPL would be eligible to receive premium tax credits, but would still be responsible for covering premiums up to 2 percent of their income. This contribution to health insurance may prove unaffordable for this low-income population.

The result? As we discussed previously, if a state opts-out of the Medicaid expansion, individuals with incomes between the state’s current Medicaid eligibility level and 133 percent FPL will be left without an affordable option for obtaining health insurance. Some are calling this coverage gap the new Medicaid “donut hole.”

Remarks From U.S. Center for Medicaid and CHIP

Cindy Mann, Director of the Center for Medicaid and CHIP Services within CMS, opened her keynote address by stating that “from the perspective of health care, the well-being of low-income families and individuals, and state financing, the importance of the states’ decision about whether to take up the Medicaid expansion can’t be overstated.” Mann said that CMS would continue to work with states on moving forward with the provisions in the Affordable Care Act and modernizing the Medicaid program, whether states chose to participate in the Medicaid expansion.

Panelists on Medicaid

Following Mann’s remarks, an expert panel featuring Dan Crippen, Executive Director of the National Governors Association; Meg Murray, CEO of the Association for Community Affiliated Plans; Matt Salo, Executive Director of the National Association of Medicaid Directors; Bruce Siegel, President and CEO of the National Association of Public Hospitals and Health Systems; and Judy Solomon, Vice President for Health Policy at the Center on Budget and Policy Priorities examined the issue further. Larry Levitt, Executive Director of the Kaiser Initiative on Health Reform, moderated the panel.

The panel outlined the varying and often times conflicting interests at stake for states considering the Medicaid expansion. Some highlights from the discussion are below: For Hospitals:

  • Siegel painted a bleak picture for hospitals in states that refuse the Medicaid expansion, as a result of the burden of uncompensated care.
  • According to the American Hospital Association, in 2010, hospitals incurred $39.3 billion in uncompensated care costs. To help offset this liability, the federal government provides hospitals “disproportionate share hospital” (DSH) payments to help them manage the cost of uncompensated care they provide to a large percentage of low-income and uninsured Americans.
  • PPACA scheduled reductions in these uncompensated care payments under the assumption that an increase in the number of insured Americans would lead to a proportionate decrease in bad debt from caring for the uninsured.
  • Siegel described how in many of the states that choose to opt-out of expanding Medicaid, providers will face DSH cuts without the guarantee of an insured patient population to make up for it. He concluded, “You can either cover people or fund the safety net and take care of them, but you can’t walk away from both.”

For Governors:

  • Crippen asserted that in the post-decision climate, the Department of Health and Human Services (HHS) must answer whether states can partially expand Medicaid up to 100 percent of the FPL, instead of 133 percent.
  • Given that individuals above 100 percent of the FPL can obtain subsidies to enter PPACA’s insurance exchanges, Crippen elaborated that partially expanding Medicaid up to this point could be a logical conclusion for states struggling to meet the program’s financial needs.
  • If states can partially expand Medicaid, Siegel noted that, while not ideal, this course of action would be better than nothing for hospitals and the uninsured.

For the Federal Government:

  • Will the federal government be willing to accommodate states interested in a partial expansion?
  • Levitt drew attention to the recent Congressional Budget Office study updating the cost analysis of PPACA after the Supreme Court ruling, which estimated that covering an individual between 100 to 133 percent FPL through Medicaid is $3,000 cheaper per year for the federal government than covering that individual through insurance exchange subsidies.
  • Given this fiscal reality, Crippen predicted the federal government would not allow partial expansions of Medicaid because of their strong financial incentive to see all 50 states fully expand.

For the Politics of Medicaid:

  • Characterizing Medicaid as “the largest and arguably most important insurance program in the country,” Solomon emphasized that one major positive aspect of the Supreme Court ruling was that it has raised awareness of and appreciation for the role Medicaid plays in the states.
  • When asked by Levitt what substantively separated PPACA’s Medicaid expansion from previous expansions of Medicaid programs like the Children’s Health Insurance Program (CHIP), Siegel responded that the base policy is not actually different. Instead, he said that “the country is different… there are fiscal and political issues at the local, state, and federal level that were not present prior.”

Given all the issues to consider, Governors may find CMS’s decision to abstain from setting a deadline on state decisions on the Medicaid expansion helpful to their decision making process. Likewise, CMS may have determined that giving states as much time as possible has the best chance of motivating full expansions. As Mann expressed during the closing of her keynote remarks, “we believe that when states do weigh in and analyze all the factors… they’ll decide that it’s in their state interest to move ahead [with the Medicaid expansion].” Time will tell.

View full event information and videos available here.

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